• FX option traders said to have taken profits on upside bets, but some are reinvesting for more USD/JPY gains

• If 164.00 barriers are breached - short gamma positioning could fuel a further rise and topside options would benefit

• However, downside strike option demand outweighs that for topside and their premiums are significantly higher, too

• 1-month 25 delta risk reversals are 1.5 vol premium for JPY calls over puts - USD/JPY downside over upside strikes

• JPY calls would benefit from a spot setback and increased volatility - certainly one driven by FX intervention

• Japanese displeasure with USD/JPY gains is no secret, so the higher it goes, the more nervous the market becomes

• Related comment - War risk fuels Fed option bets
USD/JPY 25 delta risk reversals


(Richard Pace is a Reuters market analyst. The views expressed are his own)